All groups of people need some set of principles with which to govern their affairs. Governance is important, because it helps to avoid conflict. Efficient governance goes further to ensure that the rights and interests of those involved are protected and not exploited. In the wider world, we call this system the law. In the business world, we call it corporate ethics.

What Does It Mean To “Report” A Violation?

Unlike governments, though, most corporations do not employ a police force to enforce community standards, rules, and regulations. Most often there are no corporate detectives on payroll tasked with tracking down bad actors. Instead, most business organizations rely on an internal infraction reporting system that allows the company to stay ahead of unethical issues without employing a costly, full-time, investigative service.

This system allows employees to report bad behavior anonymously, giving them a sense of agency in the control of their own work environments, while keeping potential abusers wary, careful, and in hiding. The worst thing that can happen to an organization is that it should develop a culture of apathy towards bad behavior.

Thus, in the business context, reporting a violation means to bring that violation to the attention of a fair and responsive authority.

What Happens When Unethical Corporate Behavior Goes Unreported?

Although consigned to the dustbin of corporate history, Enron is perhaps best known among industry analysts as the go-to example of what happens when unethical corporate behavior is allowed to go unreported or undealt with.

Enron was formed in 1985 by the merger of two large, Houston-area, energy companies. By the year 2000, Enron had been named the most innovative company in America 6-years running. It was reporting a corporate value in excess of $100 billion, and was employing over 20,000 full time staff and employees.

Enron was on the top of the corporate world, and the bonus checks were bigger than ever.

By the year 2001, though, Enron was dead–or insolvent, the nearest equivalent to death for a corporate entity. But how? Investigators later uncovered a systemic lapse in Enron’s ethics reporting and response system. Ethical violations were at first brushed under the rug, then they were out right ignored, over time ethics violations became not only acceptable, but encouraged.

And because employees felt like they could get away with anything, they took advantage of everything. In 15 short years, Enron went from being an innovative new star in the energy industry to a black-hole of corporate corruption.

In a manner of speaking, Enron is what happens when unethical corporate behavior goes unreported, and when an organization is allowed to follow in Enron’s footsteps, it will likely meet with the same awful fate.

Thus, it is vitally important for clients, customers, employees, and other corporate stakeholders that your organization puts in place a thorough, well planned, system of ethics violation reporting and review so this same fate does not befall your company and its members.